Korea Electric Power Corp.’s shares slumped Monday, as its earnings outlook turned grim after the South Korean government suppressed electricity tariffs to tame inflation.
Shares in the South Korean state utility lost as much as 6.9% to 25,050 won ($22.07) in early trading before paring losses. They last traded 6.3% lower at KRW25,200, underperforming the benchmark Kospi’s 1.2% decline.
Earlier in the day, the government decided to keep tariffs unchanged for the third quarter starting July despite its recognition of the company’s rising costs for fuel purchases, with the aim of keeping the country’s inflation in check.
The government plans to consider raising tariffs for the fourth quarter if fuel prices continue to rise in the coming months.
Expectations for the company’s earnings to improve this year on South Korea’s new billing system, which is designed to reflect fluctuating energy prices better, have been fading.
Nomura recently downgraded the stock to neutral from buy and slashed its target price by 24% to KRW29,000, citing slower-than-expected tariff increases in the country.
The Japanese investment bank expects tariffs in South Korea to rise 1.8% this year despite an estimated 16% increase in fuel costs.